With the inspiration of Joe Astell, the razing of the squalid Shacks and development of modern new housing is brought to a vote, in spite of Robert Carne's disapproval. But it comes too late for the Holly family, and the gifted student Lydia, thriving under Sarah's mentorship, must give up her talents and dreams.
For his part, Robert is unable to imagine a future for South Riding precisely because he is a prisoner of the past, as the secret agony of his guilt is revealed. Guilt also torments the lusty Methodist minister Alfred Huggins — guilt and a pair of blackmailers. He plays directly into the hands of Councilor Anthony Snaith, whose gentle prods toward investment in an area of land called the Wastes send Huggins head-first into a risky scheme. Financial woes compound Robert's troubles, and he ventures to Manchester in the hopes of heading off the bank from repossessing his ancestral home. Sarah, on her way to visit her sister, has too stopped in Manchester for the night, and their chance meeting leads to events for which neither is prepared, and an all-too-temporary respite from the messy collisions of life's complexities.
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Warning: Contains significant plot spoilers
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Warning: Contains significant plot spoilers
Basking in the glow of Sarah's mentorship, Lydia Holly is thriving at Kiplington Girls High, while her fellow student Midge Carne is acting out, bullying the roundly victimized teacher, Miss Sigglesthwaite. While Sarah encourages Lydia to perhaps try for Oxford one day, she reprimands Midge for her behavior, but learns that the unstable girl is herself being picked on because of her father's financial woes.
Indeed, Robert's crippling debts, due in part to the expensive care he is providing for his mentally ill wife, Muriel, seem all for naught when he learns from the hospital's matron that Muriel has no hope of ever recovering or returning home. With this news, he relives the source of his torment, remembering the incident that triggered her final fall into the abyss. Returning from the front, young Robert entered his home to find his dissipated, negligee-clad wife entertaining three drunken young men. Humiliated and enraged, he threw the men out, then forced himself upon his wife as she helplessly pleaded for him to stop, crying, "I haven't got my thing in. I mustn't have a child." That child was Midge, born to a mother incurably afflicted with puerperal insanity.
The plans for developing a new estate for the dwellers of the Shacks, stimulating the economy by providing jobs and homes, are moving forward with Astell's advocacy, Robert's opposition, and complacency from Lydia's father, who is content to dig in the fields and flirt with the widow Mrs. Brimsley. But the Holly family is shaken to the core when Lydia's mother tragically hemorrhages and dies in an effort to end her unwanted pregnancy. Lydia must mourn her dreams along with her mother, as she is now consigned to take care of the family's young children, forced to forfeit her scholarship. Fueled by grief, anger, and humiliation — having applied to the council for relief and been rejected — Lydia lashes out at Sarah, who has come to offer her condolences but represents all that is now lost to the girl. The modern and sanitary estates will come too late for Lydia.
For the lustful man of the cloth Huggins, the estates represent hope of paying off his blackmailers Reg and Bessy. Borrowing money from the oily developer, Snaith, Huggins is told in a seemingly offhand manner that the potential development site, the Wastes, bought cheap and sold high, will be worth a great deal of money. Passing this information along to Reg, Huggins suggests that the blackmailer invest Huggins' payment, returning a profit to Huggins, who would in turn pay back Snaith. But what Huggins sees as an agreement, Reg sees as a joke, and he flips his shares but pockets the profit. As Christmas nears, Huggins begins to panic about repaying Snaith. But Gaius Drew's revelation that he has himself invested in the property to a potentially enormous profit, with no conflict of interest despite his membership on the Council, is not lost on the desperate Huggins.
Christmas brings a break for Sarah, who stops in Manchester en route to visiting her sister for the holiday. There, to her surprise, she runs into Robert, who confides that, with the prospect of losing his wife's ancestral home, Maythorpe, he is pursuing a job in the city. Over a drink, the two discuss Robert's tragic marriage and Sarah invites Robert for dinner, where, dressed to the nines and dancing intimately, the two former adversaries share the sentiment that Sarah utters, "I wish life could be simpler." But when the music ends and the two decide to spend the night together, nothing could be further from simplicity. Arriving in Sarah's room, Robert is struck by a terrifying attack, forcing Sarah to run to his room for his amyl nitrate, which he inhales in desperate agony. Depleted, the broken man rests in Sarah's arms. When they awaken in the predawn, he leaves in shame, and alone, Sarah sits on the bed and sobs.